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high interest finance option

Discussion in 'Property Finance' started by HomeMinister, 11th Sep, 2015.

  1. HomeMinister

    HomeMinister Well-Known Member

    Joined:
    19th Jun, 2015
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    Location:
    Melbourne
    Hi all

    can you suggest me if i can borrow money from someone to buy investment property

    and use the interest i pay ( high interest nearly 10% pa) as tax deductable?

    not only this but say i have bad credit score and the bank that comes farward to

    finance offers 7 - 10% interest on my next IP. can this 7-10% be tax deductible?
     
  2. tobe

    tobe Well-Known Member

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    Melbourne
    If it's a loan on commercial terms and its used to gain assessable income, then yes it is deductible.
     
    Terry_w likes this.
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Are you proposing to deliberately pay a higher interest rate in order to access more tax deductions? If so, by any economic measure this would be a very silly thing to do.

    Alternately you may simply be trying to come up with a deposit and borrowing the money from a friend or relative. This can work but there's a couple of considerations:

    1. Make sure you've got enough for a 20% deposit and purchase costs. When financing the rest of the loan, mortgage insurance needs to be avoided because the insurers will have problems with the deposit being borrowed.

    2. Make sure the loan from the friend or family is included and costed into the affordability calculations.
     
  4. Elives

    Elives Well-Known Member

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    even when borrowing 20% and if it's registered as a 2nd mortgagee or a caveat i'm pretty sure most banks don't touch them and you'd have to go to pepper etc. my friend recently did this and the 80% 1st mortgagee interest rate was like 5.5-6.5% and the 20% deposit was the same. (i think you need to mirror the banks interest rate could be wrong)
     
  5. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    We've had loans approved for clients where parents loaned them the money for a 20% deposit and costs at 6% interest. The parents didn't lodge a second mortgage against the property, but there's nothing stopping them from lodging a caveat after settlement.